CBI urges caution over ever-increasing minimum wage

The
CBI is concerned that the decision to increase the National Minimum Wage (NMW)
to £4.85 next year could cost UK jobs.

Last
week the Government announced it would accept the Low Pay Commission’s (LPC)
recommendation to increase the NMW in October this year by 40p to £4.50 an hour
and to £4.85 next year.

The
CBI believes this year’s increase is a "sensible" move, but it is
concerned that the LPC’s 2004 recommended increase to £4.85 an hour – which the
Government has provisionally accepted – could price staff out of jobs.

Digby
Jones, director-general at the CBI, said: "The 2004 level is a substantial
hike and the jury is rightly still out on whether it would be sustainable.

"Companies
will accept periodic increases, as long as they do not do more harm than good.
We will need to see the state of the economy in 2004."

Jones,
said: "This [year’s increase] is a sensible balance between prudence and
boldness. We are pleased ministers have listened to the CBI’s argument that
anything more than £4.50 an hour could price people out of work and create
pressure for increases in higher wage levels."

"Those
saying the rise is too low should remember this increase is three times the
rate of inflation and double the rate of growth of average earnings. Because of
prudence, the minimum wage has so far caused only limited damage – and business
wants to keep it that way."